Issue
Is an entity selling or otherwise disposing of fuel for the purposes of paragraph 49(b) and paragraph 55(b) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA) when it applies an internal user charge to its internal business units for fuel it purchases and distributes internally for use?
Decision
No. An entity is not selling or otherwise disposing of fuel for the purposes of paragraph 49(b) and paragraph 55(b) of the EGCSA when it applies an internal user charge to its internal business units for fuel it purchases and distributes internally for use.
Facts
The entity purchases fuel and allocates it to several business units using an internal charging system.
The business units are not separate legal entities and they operate under the Australian Business Number (ABN) of the entity which purchases the fuel.
Reasons for Decision
Subsection 56(1) of the EGCSA states that you are entitled to an energy grant if you are entitled to an on-road or an off-road credit. In order to be entitled to an on-road or off-road credit, the entity must satisfy a number of tests, in particular the entity must have purchased the fuel.
However, paragraph 49(b) and paragraph 55(b) of the EGCSA provide that an entity which purchases fuel and subsequently sells or otherwise disposes of the fuel is not entitled to and is taken to never have been entitled to an on-road or off-road credit.
The Administrative Appeals Tribunal considered the issues of 'use' and to a lesser extent 'sale or disposal' in Re Riviera Nautic Pty Limited v. Federal Commissioner of Taxation [2002] AATA 657. Riviera Nautic was decided in relation to the Diesel Fuel Rebate Scheme which was the precursor to the Energy Grants (Credits) Scheme and was administered under the Excise Act 1901 and the Customs Act 1901 . In that case, the AAT considered that in determining whether something has been sold, one should consider whether property in it is intended to pass. Further, the Macquarie Dictionary (Rev 3rd ed) Macquarie, Sydney 2001 defines 'sell' as: 1. to give up or make over for consideration; dispose of to a purchaser for a price.
The entity distributes fuel internally to business units for a charge. This charge is not consideration as it does not move from one party to another, but merely within the entity itself. Neither does property pass as it remains with the entity.
Therefore, the entity has not sold the fuel it allocates to its business units. It has merely distributed the fuel for use internally. The fact that an internal charge is made to the business unit does not alter this fact.
Therefore, an entity does not sell fuel for the purposes of paragraph 49(b) and paragraph 55(b) of the EGCSA when it applies an internal user charge to its internal business units for fuel it purchases and distributes internally for use. This is so, even though it allocates the fuel to its internal business units for a charge, as the business units are not separate legal entities.